New arrivals? Signs of recovery have some businesses hiring

Entrepreneur, Feb, 2004 by Chris Penttila

BY NOW, YOU'RE WELL-acquainted with the phrase "jobless recovery," a term created during the slowdown of the early 1990s. But today's jobless recovery is different from the last one. The U.S. economy has lost at least 2.1 million jobs since 2001, but companies keep showing incredible gains in employee output--an anomaly, since productivity has traditionally decreased in slow times. Consider this: In the third quarter of 1993, nonfarm output per hour clocked in at 1.5 percent, according to the Bureau of Labor Statistics. By the third quarter of 2003, nonfarm output per hour was a staggering 8.1 percent.

Companies are finding they can increase productivity quarter over quarter without adding new employees or, as used to happen during past slowdowns, by rehiring the people they've laid off. Midsize and large companies are focusing more than ever on work force cost management, measuring the bang for the buck of every employee, says Jay Doherty, principal for Mercer Human Resource Consulting LLC in New York City and co-author of Play to Your Strengths: Managing Your Internal Labor Markets for Lasting Competitive Advantage (McGraw-Hill). "There are no more easy cost reductions," he says. "Now it's [about] value."

Add in the white-collar jobs lost to globalization, and you have economists debating whether the U.S. economy has been altered permanently, for better and for worse. John Challenger, CEO of Chicago outplacement and research firm Challenger, Gray & Christmas Inc., believes the U.S. economy is undergoing a fundamental paradigm shift, while the expansion following the recession of the early 1990s was all about job creation, today's lean-and-mean expansion is about increasing productivity and mastering technology with fewer employees. "We've been in expansion for two years, and we've lost jobs," Challenger says. "Companies are saying, "We're not going to hire more people. Let's learn how to use the technology.'" Challenger expects job growth in 2004 to remain meager compared to the 1990s.

So what does the big picture mean for entrepreneurial businesses, which have typically been the "little engine that could" in post-recession economies? Just like big companies, you're doing more with less. You've had to keep employees happy with bigger workloads. And increasingly, you're reaching a point where you can maybe, just maybe, consider hiring again.

Elaine Price, president and CEO of CYA Technologies Inc., a 5-year-old enterprise software firm in Trumbull, Connecticut, with annual sales of $4.9 million, feels confident enough to expand the company's staff of 50 by up to 12 new employees in early 2004 to take advantage of the great applicants currently on the market. The economy "is getting better," says Price, 47.

But many entrepreneurs are wrestling with the decision to either snap up good people, knowing they might have to lay them off if the recovery doesn't stick, or not to hire and risk driving employees into the ground. Sales increased 54 percent last year at Dilly Dally LLC, a 13-employee Raleigh, North Carolina, business selling high-end baby items through two retail locations and online. To meet demand, the company hired three full-time employees. But the retailer is dillydallying when it comes to additional hiring in 2004.

"We have just the right number of people," says Angela Krause, 34, who co-founded Dilly Dally five years ago with husband Rod, 38. She's "cautiously optimistic" about the economy. But unless she sees phenomenal growth over last year, the only hiring she foresees "is hiring to replace someone."

In this jobless recovery, let your existing customers be your guide, suggests Alfred E. Osborne Jr., senior associate dean at UCLAs The Anderson School of Management. "If [customers] demand more services of you, and you're straining your employees, then it's time to hire." Still, that doesn't have to mean full-time workers: Temps, independent contractors and part-timers can ease the load on existing staff at peak times.

Surveys show employees feel overworked and underappreciated amid ever-increasing demands for productivity. If you're choosing not to hire as business increases, make sure to offer mentoring and coaching as well as opportunities to grow on the job, says Roger Herman, a strategic business futurist and CEO of The Herman Group, a consulting firm in Greensboro, North Carolina.

Challenger, Gray & Christmas predicts the next great job boom won't be until 2008. What will unemployed Americans do in the meantime? Says Challenger, "They'll become entrepreneurs."